The content describes a dynamic decision-making scenario where an investor has to choose between investing in one of two projects or gathering more information from consultants. At each stage, the investor may seek counsel from one of several consultants, who provide partial information about the realized state for a fixed cost.
The key insights are:
If one of the consultants can reveal the true state with positive probability, this consultant will be used in any optimal strategy, provided the consultation cost is sufficiently small.
Under a technical condition on the signaling probabilities of the consultants, the value function is piecewise linear, and there is a finite number of possible optimal strategies as a function of the initial belief.
In a special case where the consultants are either "revealers" (can reveal the state with some probability) or "estimators" (provide a probabilistic estimate of the state), the optimal strategy is either to consult no consultant and immediately select an action, or to select one consultant and repeatedly consult them until making a decision.
The analysis reveals important properties of the optimal strategy and its dependence on the belief and the consultation cost.
To Another Language
from source content
arxiv.org
Key Insights Distilled From
by Yuval Cornfe... at arxiv.org 05-01-2024
https://arxiv.org/pdf/2404.19507.pdfDeeper Inquiries